The lawsuit, filed by shareholders’ law firm Milberg Weiss accuses the company of ‘tricks, contrivances and bogus contractions’ to inflate AOL’s share price.

It alleges that senior executives, including its former chairman Steve Case, benefited from insider trading when AOL merged with Time Warner in January 2001.

Past and present executives ‘are accused of carrying out a scheme to overstate the number of the company’s internet subscribers and inflate its e-commerce advertising revenues, profits and backlog of future business to help secure a merger with Time Warner,’ a statement by Milberg Weiss read.

The plaintiffs argue they lost around $500m because of the alleged deception.

E&Y was auditor of both companies before the merger, but has denied any wrongdoing and stands by its work, according to reports, while the company said it would defend itself vigorously against all allegations.

Last month, AOL officials continued to insist they were cooperating with the SEC, after already reporting accounting problems totalling $190m and handing over thousands of pages of documents to the regulator.